Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.</li>
<li>If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.</li>
<li>I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.</li>
</ul>


Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.
If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.
I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.


Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

<ul>
<li>Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).</li>
<li>If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.</li>
<li>This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.</li>
</ul>


Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.


Toshiba (6502) Update - No Longer Worthwhile to Be Short Toshiba Vs Peers

<ul>
<li>Overnight, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> has released an <a href="https://www.global.toshiba/content/dam/toshiba/ww/ir/corporate/news/20220719_2.pdf" target="_blank" rel="noopener">update</a> "Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  </li>
<li>Nikkei <a href="https://asia.nikkei.com/Spotlight/Toshiba-in-turmoil/Japan-Industrial-Partners-Bain-advance-in-bidding-for-Toshiba" target="_blank" rel="noopener">reported</a> those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.</li>
<li>Now parties will start due diligence, and Toshiba will examine bids for "measures to enhance corporate value" and certainty of execution (given national security-sensitive issues, and funding). </li>
</ul>


Overnight, Toshiba Corp (6502 JP) has released an update "Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  
Nikkei reported those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.
Now parties will start due diligence, and Toshiba will examine bids for "measures to enhance corporate value" and certainty of execution (given national security-sensitive issues, and funding). 


Toshiba (6502) Update - Shares Down Since Last Look, "News" Isn't Really. IRR Grid.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).</li>
<li>Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it's a start.</li>
<li>We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.</li>
</ul>


The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).
Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it's a start.
We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.


Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

<p>We highlight several positive developments that have occurred since last week’s <em>Int’l Compass </em>report, all of which continue to support our overall constructive outlook. Last week we noted Europe’s STOXX 500 was on the cusp of a breakout above 4040; we got the breakout. WTI and Brent crude oil also broke above key multi-year resistance at $67 and $70, respectively. The MSCI ACWI, ACWI ex-US, and EAFE indexes each hit new all-time highs and remain in uptrends. The MSCI Emerging Markets index (EEM-US) bullishly inflected above short-term resistance at $55.35 and RS is reversing the downtrend. These are all bullish signals for global equities, and our constructive outlook remains appropriate.</p>

We highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our overall constructive outlook. Last week we noted Europe’s STOXX 500 was on the cusp of a breakout above 4040; we got the breakout. WTI and Brent crude oil also broke above key multi-year resistance at $67 and $70, respectively. The MSCI ACWI, ACWI ex-US, and EAFE indexes each hit new all-time highs and remain in uptrends. The MSCI Emerging Markets index (EEM-US) bullishly inflected above short-term resistance at $55.35 and RS is reversing the downtrend. These are all bullish signals for global equities, and our constructive outlook remains appropriate.

Major Breakouts For WTI and Brent Crude Oil. Actionable Themes: Energy, Manufacturing, Autos/Parts

Japan

FUJI ELECTRIC CO.,LTD manufactures electric machinery and electronic devices. The Company's products include automatic vending machines, factory automation equipment, and power supplies, as well as information and electronic components such as power semiconductors and integrated circuits (ICs).

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Fuji Electric (6504 JP)

Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

Bidders are approaching 2nd Round deadlines, and news/comments are starting to seep out. Expect more. I expect a decision at/after H1 results. If...

Travis Lundy

Toshiba (6502) Update - No Longer Worthwhile to Be Short Toshiba Vs Peers

The IRR to be obtained by buying Toshiba and expecting Probability X% of a Privatisation and (1-X%) of no deal has gone up sharply since end-June....

Travis Lundy

Toshiba (6502) Update - Shares Down Since Last Look, "News" Isn't Really. IRR Grid.

Toshiba (6502) is -8% vs Peer Basket after the late June pop on a "¥7,000 deal." Semi/memory peers weaker while industrials better. That lifts IRR...

Travis Lundy

Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China $MCHI, and...

Vermilion Research

Major Breakouts For WTI and Brent Crude Oil. Actionable Themes: Energy, Manufacturing, Autos/Parts

Today we highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our...

Vermilion Research

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